Co-op fires fund manager Merrill

Thursday 16 May 2002 23:00 BST

THE Co-op has fired Merrill Lynch as manager of its pension scheme, warning it may sue the business over its investment performance. Ending a 30-year relationship, the Co-op is to shift the £500m it has under Merrill Lynch Investment Management to Legal & General Investment Management at the end of May.

'We have been unhappy with Merrill's investment performance for some time,' Co-op group secretary Nick Eyre said. 'In view of the recent exodus of key managers from Merrill's and following specialist advice, we have decided to dispense with their services.'

MLIM has already been forced to pay out £70m to consumer goods group Unilever to settle a High Court action over its pension fund performance. Several other companies, including drugs giant AstraZeneca and grocer Sainsbury, have also said they're considering legal action over MLIM's handling of their pension funds.

The Co-op has hired City law firm Richards Butler to decide on what action to take. The Co-op would not reveal the performance of its fund with MLIM, one of six fund managers to handle its pension money. More than 60,000 employees' pensions are tied-up in the £2bn fund from across a Co-op business that spans funerals, travel and supermarkets.

A spokesman for MLIM said: 'We are disappointed to lose the mandate after a long relationship but we are not aware of the basis for any claim from the Co-op.'

He added talk of a crisis at the fund manager given reports of high-profile departures was 'rubbish'.

Several senior staff have recently quit, including its head of equities outside the US, Andreas Utermann, and Anne Richards, head of a team running money for smaller pension funds and around half her team. Some consultants who advise pension funds on hiring and firing managers have urged clients to review contracts with MLIM because of the staff losses.

But the MLIM spokesman said only 14 of MLIM's 600-strong investment team had left since the turn of the year. He added MLIM had taken £6.3bn of net new business since January.

MLIM settled the Unilever case in December with the payout, made without admission of liability. Sainsbury said the position regarding its £3bn fund was unchanged despite the Co-op's possible legal action. 'The trustees of our pension fund are continuing to review the position in relation to the settlement between Unilever and Merrill Lynch,' a spokeswoman added.